Press Concentration

ByWilliam H. Jonesand

Laird Anderson

July 24, 1977

Within two decades, virtually all daily newspapers in America will be owned by perhaps fewer than two dozen major communications conglomerates.

Given current tax laws and economic conditions, as well as an apparent inability to challenge many media acquisitions under current antiturst laws, the rapid concentration of press power in the hands of a giant companies appears inevitable.

This is the major conclusion of a six-month study by The Washington Post of the newspaper industry today - a big and healthy business whose daily activities, problems and crises seldom are chronicled in the press itself.

But if you stopped by any newsstand in recent months, and studied the content of major magazines, it would easy to conclude that the newspaper industry today is one of the main public concerns.

In Harper's, columnist Kevin Phillips spell out the "case against monopoly of news and information" and calls for a public policy to "bust" the "media trusts;" New York magazine looks at "The New New York Times" and "finds "It Ain't What It Used to Be;" The Washington Monthly tackles "The Imperial Press," one seeking "fawning attention" and becoming "self-righteous;" Henry Fairlie, writig in The New Republic, proclaims there was "nothing very glorious, no journalistic skill involved" in publication of the Pentagon Papers and suggests that profits have become the only goal of publishers, making daily newspapers "as flavorless but as profitable as a Big Mac."

Many of these articles in periodicals rest on a major premise - that concentration of press ownership and growth of newspaper chains are diluting the deversity of American newspapers and endangering democracy in the process. As Gannett Co. president Allen H. Neuharth quipped recently, group ownership "seems to be the current attention getter."

However, there is little evidence that the public at large is outraged or even concerned by these issues. As Gerald A. Connell, the Justice Department official responsible for monitoring potential antitrust abuses within the newspapers industry, said in a recent interview:

"There has been no strong movement to control ownership; most of the interest (in studying newspaper mergers or acquisitions) seems to come from the media itself."

In part, the lack of public interest may have resulted from the absence in the press of detailed coverage of a historically secretive business, the sort of reporting daily newspapers provide on regulated utilities or the oil industry, for example.

Thus, many Americans genuinely are surprised when told of the extent of press ownership concentration today and the trends which are gobbling up remaining independent fdailies at a rate of more than 50 a year (72 in 1976, 49 in 1975).

One of the highest officials in the American government and an award-winning reporter for one of the nation's major papers, asked by a prominent publisher to estimate the Gannett Co. empire, each guessed that the Rochester, N.Y.-based firm had enough papers to count on two hands. In fact, Gannett is the largest chain in the nation in terms of number of papers, with 73.

And, it was the continued growth by Gannett that sparked the interest of Rep. Morris Udall (D-Ariz.) in the question of press ownership. He recently introduced legislation with 25 co-sponsors to study concentration in several industries, including newspaper publishing.

"In my hometown, the Tucson Daily Citizen, a good, solid, conservative daily owned for years by the Small family - a family of renowned civic-mindedness and accomplishments - was sold a few months ago to the Gannett chain," Udall told the National Press Club in April, where he revealed the proposed concentration study.

"Just a generation ago, nearly every American icity had two or more daily newspapers. Almost every town and village had its weekly paper, home-owned and operated each with its distinctive local flavor," Udall recalled.

But today, most cities have no newspaper competition in terms of separate owners and 72 per cent of daily newspaper circulation is controlled by companies that published two or more dailies.

Udall does not condemn Gannett but suggests "there is an increasingly prevalent pattern there that has disturbing social implications . . . We buy chain-store drugs with perhaps just a fleeting memory of the corner drug store and the soda fountain. Our autos use chain-store gas . . . and now, chain-store news is upon us."

The Arizona Democrat hopes that congressional hearings will shed light on concentration both in newspaper and book publishing, and Sen. Edward M. Kennedy (D-Mass.) has said his sub-committee on antitrust and monopoly also has an interest that, "if and when needed, (antitrust laws) are ready and fully able to promote a diverse and competitive press."

As might be expected, many publishers have denounced Udall's campaign.

"I don't see any sinister implications . . . I don't see anybody, any concentration of power here that should disturb anybody." said Alan S. Donnahoe, president of Media General, Inc., publisher of the Richmond newspapers and owner of other newspaper and communications properties.

Alvah H. Chapman Jr., president and chief executive of the Knight-Ridder Newspapers in Miami, said Udall "is remembering the good old days that never were."

To be sure, Chapman continued, "A fair number of American communities, who told the truth as they saw it and fought for the best interests of their areas."

But that was not the dominant pattern, the Knight-Ridder executive stated: "Many, many newspapers across this country were pervasively mediocre, unprofessional and timid. They often lacked the economic strength - or will - to resist the special interests which called the shots in their communities." Some Uneasy Publishers

While emphasizing their views that many chain newspapers are better than they were under independent of family control, some publishers nevertheless are uneasy with the growth of media conglomerates.

"Nobody knows" the extent to which daily papers are being bought up by larger companies, said Katharine Graham, publisher of The Washington Post and chairman of the Washington Post Co., which itself owns Newsweek magazine, broadcast stations, and a daily newspaper in Trenton, N.J.

"Will the public care if one person owns them all? she asked. "Obviously it would and then . . . would the public care if six people owned them all? Yes."

As Graham sees it, "You have an irreversible trend going and nothing can stop it short of government intervention and then, at that point, we all choke . . . I really don't know the answer."

New York Times publisher Arthur Ochs Sulsberger said he's "not that hot for newspapers gobbling up others . . . a great strength of the United States is a wide range of opinions."

While Sulzberger said he might favor some limitation by the Justice Department on the numbers or geographic concentration of newspapers a single company can acquire, he added that, in the best of circumtances, his New York Times Co. would have purchased a few more papers in the so-called Sunbelt states before such a requirement takes effect.

Behind that stated hope are economic facts of life: The New York Times Co. owns 13 papers in Florida and North Carolina, in addition to other communications properties. In 1976, these Sunbelt papers produced million of revenues , while the big New York Times earned pre-tax profits of $10.2 million on revenues of $290 million.

Sulzberger also noted that the aAmerican newspaper industry is probably the one unregulated business left in the world. "Congress should leave us substantially alone," he said.

Otis Chandler, vice chairman of Times Mirror Co. and publisher of the firm's Los Angeles Times, also is "ambivalent" about trends toward concentrated media ownership.

"On the one hand, I can, if I'm asked . . . make a persuasive argument . . . about the advantages of group ownership. I can also be persuaded to make an argument on the other side for independence , that loss of independent newspapers and voices around the country is a bad thing, and so I guess I'm kind of on the fence," Chandler said.

Chandler said fuller news accounts by the press itself on acquisition deals may have spurred congressional interest, and his own newspaper has set an example for the industry with its news media coverage and criticism by David Shaw, printed at great length and started on Page 1. "I just don't know, but I'm not convinced that this is a major new serious threat to the press. I think politicians have always disliked us, they wish we wouldn't print things about them that they do, except for the good things," Chandler stated.

The L.A. publisher adds that, in small cities, people care about the concentration trend, while in large metropolitan areas, "All they really care about is who's got the best paper, and if you've got the best paper, and if you've got a good paper, I'll read it and buy it, rather than necessarily how many papers there are, or if tow or three disappear, isn't it terrible. I just don't think they care." An Economic Web

But the trend toward concentration is catching big-city and small-town dailies in the same economic web. Chains -St. Petersburg president-editor Eugene Patterson calls them "sharks" - are seeking newspapers to buy.

In the process, America's press is coming to be dominated by many companies not generally regarded as household words - Capital Cities Communications, Central Newspapers, Harte-Hanks, Lee Enterprises, Walls Newspapers, to name just a few.

According to John Morton, who analyzes newspapers from an office in Georgetown for the brokerage firm of Colin, Hochstin & Co., some 170 companies now own more than 1 daily paper. Most of them own only 2 or 3, but the 4 largest chains - Newhouse, Knight-Ridder, Chicago's Tribune Co. and Gannett - now account for some 21 per cent of all U.S. daily circulation.

"As long as the First Amendmend is still operative . . . as long as companies continue to be careful not to buy in overlapping markets, I don't think there's anything" that will stop acquisitions of remaining independent papers "until they're all gone, basically," Morton said flatly.

Newspapers, in fact, don't really compete with one another outside one market, Morton stated. "I mean, Washington doesn't really compete with Baltimore" in an era when the bulk of newpaper ads come from local sources. "I mean, there are really separate markets and so there is no real antitrust way you can go after them . . . I mean, it's none of the government's damned business . . . is what the Constitution says," he added.

"And what really amazes me is that eveybody gets so God-damned exercised over the newspaper concentration going on in every industry in this country for 100 years, really a lot of concentration," he added.

"Capitalism workd pretty much the same way for everybody in this country. And just because the newspaper industry is backward in concentration as they were in production doesn't mean they aren't going to eventually get to the same point," the analyst concluded.

Columnist James Reston, a unique person in American jounalism because of his stature a correspondent for The New York Times as well as being a director of the New York Times Co., also is unwilling to sound the warning bells over press concentration.

From his office in The Times' Washington bureau, Reston discussed a technological revolution that is bringing about the greatest changes "since the invention of moveable type." He said that "if we're talking about the dissemination of information," rather than the future of "Kay Graham, or Authur Sulzberger and (Washington Star Communications chairman) Joe Allbritton, I don't think we should worry."

The capacity of "any group to circu- late ist ideas or report news of any type is greater today it has ever been in the history of this country . . . economically, we're at the point that the old printer was, when he had a sack of type . . . swung it over his shoulder." Reston asserted.

"Anybody, whether he's a lover of roses, a homosexual, a nut on changing the Constitution, can get that thing printed up, really quite cheaply," sais the Times's columnist.

He also asserted that many a city referred to as "a one-newspaper town" has several broadcast outlets, so there are many media outlets. But critics note that, of some 7,370 U.S. commercial radio stations, more than 300 are owned by newspaper publishing firms and, Of 728 commercial TV stations, close to 100 are properties of firms that publish dailies. More Separate Voices

Nevertheless, the late Prof. Raymond B. Nixon of the University of Minnesota compiled data in 1969 showing a mushrooming of separately owned media voices during the 20th Century, even while the absolute number of daily newspapers was declining and cencentration of paper ownership was increasing. He found that 1,500 cities with dailies in 1969 has a total of 5,081 media voices; of these, 4,879 were competing (separately owned) voices in 1,298 cities. There were 202 cities where all media were owned by a single firm, but nearly all were suburbs of large cities with many outside "voices," Nixon said.

Currently, the newspapers industry is engaged in a court battle over continued ownership of radio and TV stations in markets where their papers are published.

The U.S. Court of Appeals here, in a March decision since appealed to the Supreme Court, overturned Federal Communications Commission policy permitting the same company to own newspaper and broadcast properties in the same city. At stake are billions of dollars worth of radio and TV stations now owned by newspapers - 135 AM stations, 96 FMs, and 60 TV's.

The FCC had decided that, in the future, any change of ownership would require divestiture of broadcasting or the newspaper but permitted existing cross-ownership patterns to be "grand-fathered." But the court said all existing joint ownerships should be abolish except in cases where public interest could be proved.

In the Washington area, the court's decision would force The Washington Post Co. to sell WTOP AM-TV; the Baltimore Sun and Baltimore News-American to sever ties with WMAR FM-TV and newspaper firms in Fredericksburg, Newsport News and Norfolk to divest radio and TV stations.

All the while, newspapers are facing challenges to maintain readership, which has not kept pace with population growth. New York Post publisher Rupert Mucdoch says bluntly that his is "an industry under siege."

The facts about the newspaper industry are not readily apparent and often get obscured in public concern which focuses primarily on news content (about 35 per cent of the average paper, the rest is advertising) and its influence on society. Few people, for example, are aware of the revolution in technology of which Reston speaks.

But newspapers are consumer products that first of all must make an adequate profit (and most of them do) to stay in vusiness.

While the First Amendment protects publishers' freedom to print news and information, it does not shield their business operations. In this respect, they are vulnerable to government regulations in such things as advertising practives and postal rates, and are subjec to the same economic laws that spell success or failure for any other commercial enterprise.

As an industry (most publishers cringe at the word and prefer "business" with its softer connotation), newspapers are the third largest U.S. manufacturer in terms of employment - exceeded only by auto and steel producers. Last year, there were 382,700 persons on newspaper payrolls, up from 378,500 in 1975.

Most of these workers are employed by privately owned papers that don't have to publicly discuss their finances. Of the nation's 1,762 dailies (a number that has stayed firly constant since 1945, fluctuating between 1,749 and 1,774 in 1973; there were 2,942 in 1929), only an estimated 200 or so are owned by companies that sell stock to the public and issue business reports for all to see.

Some media critics are quick to take note of this ownership pattern and charge that many newspapers, so quick to probe the finances of other industries, get skittish when it comes to talking about their own.

Ben Begdikian, a former national editor and ombudsman for The Washington Post, says that "owners are sure that secret finances are crucial to their survival and that anyone trying to penetrate this secrecy has murder in his heart."

This infuriates a alot of newspaper owners who reply that they have the same rights as other privately held business. That's true, of course, but because they reach so many people, newspapers often are regarded as quasi-public products and quite different than appliances, detergents and toothpaste. A Collective Migraine

But newspapers, most of them selling for 15 cents, aren't reaching as many people as they were in 1973, a peak year, and the slide has created a collective migraine headache in newspaper executive offices. Curing this pain is the biggest challenge facing editors and publishers.

Some papers have fared so badly they've had to close. The recent demise of the National Observer, a general news weekly published by Dow Jones & Co., that suffered advertising and circulation problems, is an example.

Over the past three years, daily circulation (which makes up 25 per cent of revenues) has plunged 2.1 million from a total 63.1 million to 60.9 million last year, according to industry and government calculations. Industry officials look for a slight increase this year.

The most often cited reasons for apparent reader disenchantment include more reliance on television (which has had a major effect on many afternoon papers) and radio news, the growth in special-interest publications, more leisure-time activities (which has forced price increases and made the newspaper in some cases an expendable item in the family budget: Why take more than one?) and, perhaps the most galling criticism of all, that many newspapers aren't fully relevant to changing life styles and values.

In short, many executives are disturbed that their products aren't as useful as they once were.

Some of the circulation decline came when publishers, reacting to fewer advertising dollars coming their way as a result of higher ad rates and the need to cut expenses such as the skyrocketing cost of newsprint, made selective cuts themselves.

"We cut out unprofitable circu- tion, and we arbitrarily cut back some of our low-income circulation," said Chandler, of the L.A Times.

Contrary to some publishers, Chandler feels there has been over-reaction to at least one other often-cited reason for the circulation drop."I don't like to say anything against my fellow publishers, but I think there's a disturbing bit of hysteria going on" concerning the perceived decline in young readers, he said."I'm not willing to say that there is a major trend of loss of readership among young people. We have done research within Times Mirror that indicates that question is still in doubt," he added.

A lot of research coming out now reflects data collected during the 1974-75 recession that indicated young people weren't reading papers, he added, while his research indicates that young adults are settling down later in life and tend to postpone developing a newspaper reading habit until theirlate 20s.

Historically, newspapers never have had a high readership among teenagers. Through the American Newspaper Publishers Association, a trade group with headquarters in Reston, the industry and individual newspapers are trying to reach elementary and high school audiences by introducing newspapers as classroom teaching aids.

In any event, tradition-bound newspapers, reluctant to change in the past, are changing rapidly now. Some of the changes have been cosmetic and include such things as brighter, bolder and more innovative design to appeal to the eye. But others have been more substantive and include greater use of personal advice columns on a variety of topics - not just for the lovelorn. Many newspapers have become more consumer-oriented and have expanded their letters-to-the editor columns and opposite-editorial pages to allow more room for citizen comment.

The once-staid New York Times has taken a new approach to recover lost circulation by introducing four regional supplements on Sunday and some new life-style sections other days of the week.

Invariably, such changes disturb some editora and reporters, who see more space being devoted to softer feature material rather than hard news, but most publishers taking stock of readership surveys are adamant.

Recently, publishers got still another warning at an ANPA concention that, if they didn't liven up their products, they were in danger of seeing them die. That challenge came from the Australian press magnate, Murdoch, who recently bought some publications in New York including the New York Post, an aternoon daily in competition with the widely circulated Daily News and the Times, both morning papers.

Murdoch, who has the reputation of sensationalizing his publications, said, "I'm simply pleading the case that without first gaining the attention of our readers, the rest is so much waste of time. A press that fails to interest the whole community is one that will ultimately become a house organ of the elite engaged in an increasingly private conversation with a dwindling club."

Some publishers linked his remarks with a call for better writing and stories with greater reader impact. Warren H. Philips, president of Dow Jones & Co., Inc., publisher of the Wall Street Journal, said, in those respects, "I would endorse his call for liveliness."

Others, however, worried about the chance for creeping sensationalism, aren't so sure. Otis Chandler said, "I'm an outspoken critic of his line of reasoning."

Chandler claimed that Murdoch's appeal aims at building circulation alone, and perhaps among readers who lack buying power and therefore don't necessarily appeal to advertisers.

"The economics of American newspaper publishing is based upon an advertising base, not a circulation base to support our product. And that's what Mr. Murdoch fails to realize," Chandler said.

Apart from these concerns, daily newspapers are being hard-pressed by competing media other than television which, according to one survey, is the prime source of news for 65 per cent of Americans.

More professionally operated and edited weekly newspapers are on the climb in suburbs across the country and are a major source of detailed local news that dailies often have a hard time matching.

In all, more than 7,500 weeklies, up 93 from 1975, had a total circulation of 38 million last year, an increase of 2.8 million from the year earlier.

Their average circulation in 1976 was 5,012 and their estimated readership was 152 million, up 11.3 million from 1975, according to the National Newspaper Association, which represents most weeklies in Washington.

Another sore point is the growing strength of the so-called weekly "shoppers," many distributed free, that often are exclusively devoted to advertising, although some have a mix of advertising and news.

These publications, particularly in markets where newspapers are of poor quality and don't have a loyal following, can quickly become the major vehicle for local advertisers. According to industry sources, some newspapers have failed because shoppers got the best of them. Debate Over Ownership

For now, however, concerns sbout newspapers survival are overshadowed by the debate over ownership.

"The possibility that newspapers and other media will be swallowed into stifling congomerates that will shut down rivals and shut off differing viewpoints is, naturally, intensely troubling in our democracy," said Sen. Kennedy.

Newspaper executives point out that current tax laws are what make the remaining independent papers vulnerable. "Until those laws are changed to allow an independent owner to pass on his newspaper to his heirs without confiscatory inheritance taxes, the groups will get larger. Independent owners in many instances have no alternative but to sell to the highest bidder," editotialized the industry trade journal, Editor & Publisher.

Some critics charge that chain owners might dictate editorial policy to their newspapers. While that potential does exist, industry leaders insist that most chains wouldn't think of the idea.

John Morton says there's not much difference between independent and chain-owned newspapers.Most newspapers in the United States, "whether as monopolies," he says, adding that "independent, locally owned newspapers have seemed, if anything, less willing than their group-owned bretheren to tilt against the local establishment of whih they and their owners are inevitably members of large standing."

What follows is a brief look at the newspaper industry's revenues, costs and profits:

REVENUES: Seventy-five per cent from advertising and 25 per cent from circulation.Advertisers last year spent an estimated $33.6 billion and nwspapers got the lion's share, $10.2 billion, or 30 per cent. (Television got $6.5 billion, or 19.7 per cent, but its change from 1975 was at a faster rate than newspapers).

COSTS: Outside of payrolls, the major expense is for newsprint. According to the ANPA, the price of the raw material has doubled since 1970 and now is more than $300 a ton. Newsprint takes 25 to 40 per cent of the total operating costs of large U.S. newspapers and 15 to 25 per cent for smaller papers.

PROFITS: The 13 major publicly owned newspapers companies analyzed by Morton's research service last year earned an average net income of $25.7 million. After-tax profit margins averaged 10 per cent of sales compared with 5.4 per cent for all companies in Fortune magazine's list of the 500 biggest industrial firms and 6.9 per cent for all printing and publishing. With the introduction of new labor-saving production technology profits are sure to increase.

There's no way to know for sure what the industry's overall profitability is, because most newspapers are privately owned. But analysts say that the industry is generally in robust health, and that the profits of well-managed privately owned dailies and of publicly owned dailies are closely parallel.